All posts in Chapter 13

Form 1099 in Chapter 13 cases

By | March 2, 2012 | Chapter 13, Taxes | No comments

A reader asks: If a second lien is stripped in a chapter 13, and the mortgage lender issues a 1099 before the discharge is entered, is the cancellation of debt income still excluded from gross income under IRC Section 108?

Answer: The debt is not uncollectible until there is a discharge that gets rid of  it.  The lender can’t issue the 1099, even if there is a confirmed plan that  hoses it on 70% of the debt, because the debtor may flake out and never  complete the plan, win the lottery, and HELOC lender can collect.  But lenders aren’t always rational about their issuance of 1099s.  If the  debtor gets a 1099 during or after a year when he was in bankruptcy, the  debtor should file Form 982 with his return explaining why the 1099 doesn’t  represent taxable income.

IRS can’t assess the tax on COD income until either the taxpayer reports it  on his return, or it goes through the deficiency process ­ audit, Tax Court,  the whole enchilada.  FTB can assess as soon as it thinks it’s being abused,  but it would just about never open an audit on this issue before the IRS would.

Judge Catherine Bauer Chapter 13 Cases

By | February 2, 2012 | Chapter 13, Judges Corner | No comments

Judge Catherine Bauer advised counsel today that all of her chapter 13 cases are being transfered to new Judge Mark Houle.

Update Chapter 20 Lam Motions

By | February 2, 2012 | Appeals, Cases, Chapter 13, Judges Corner | No comments

Judge Catherine Bauer ruled today that a discharge is required for a successful Lam Motion.     

NACBA filed an amicus brief on this issue for an appeal in the 7th Circuit District Court.  See attached.

Central District Courts Approve Higher “No-Look” Fees in Business Chapter 13

By | January 30, 2012 | Chapter 13 | No comments

Effective immediately, you may charge a RARA fee of $5,000.00 for business cases in the Central District of California.

I think it will apply to any cases which have not been confirmed yet.  You will have to file an amended RARA.  The larger problem is a practical problem – will your clients agree to the higher fee when they have already agreed to the lower fee.  I think the best way to handle this is to apply the new fee to cases where you have not yet entered into a retainer agreement with the client.

Aki Koyama

Central District News from the last cdcbaa Meeting

By | January 29, 2012 | Chapter 13, Court Clerk Information, Judges Corner, U.S. Trustee | No comments

Central district news and interesting tidbits from cdcbaa President Keith Higginbotham:

-The next four cdcbaa meetings will be held on 2/4/12; 3/3/12; 4/21/12; 5/19/12.

– Hon. Ellen Carrol is retiring on February 6, 2012 and Hon. Robert Kwan will move to the Los Angeles Division to fill the vacancy.  Hon. Catherine Bauer will move to the Santa Ana Division and take over Judge Kwan’s calendar.

– There is a new judge in the Riverside Division, Judge Mark Houle.

– The U.S. Trustee’s Office in Downtown is moving to 915 Wilshire Blvd., Wilshire and the 110 Freeway. The move will happen in July or August of this year.

 – Tip for “Lam” Motions — attach a printout from the F.D.I.C.’s website to show that you have served the correct address for the bank whose lien you are trying to “strip.”

– Judges are starting to consider sanctioning attorneys who file both the RARA and the Statement of Limited Scope in chapter 13 cases.

What goes in the 109(e) bucket? Santos v. Dockery goes to the 9th Circuit Court of Appeals

By | January 28, 2012 | Appeals, Chapter 13 | Comments Off on What goes in the 109(e) bucket? Santos v. Dockery goes to the 9th Circuit Court of Appeals

When I explain Chapter 13 to clients, I usually describe the amount of general unsecured claims as being the size of the clients' “bucket” and I explain that their plan payments might fill 0% to 100% of the “bucket” during the plan, before the “b

ucket” is tossed out (discharged), with certain exceptions such as student loans, for example.

Section 109(e) provides a limit on the maximum size of the “bucket” for individuals and spouses. To be eligible for Chapter 13, debtor(s) must owe “on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than $360,475…” This amount was set as of April 1, 2010 and is adjusted every three years. It applies uniformly accross the country, despite the significant variations in real estate values and amounts of home loans.

In depressed (or recessed) real estate markets, like now, it is common for debtors to use Chapter 13 to avoid junior undersecured home loans pursuant to 11 U.S.C. Sections 506(a) and (d). In states with relatively high real estate values, like California, junior home loans can be hundreds of thousands of dollars. If the avoided junior home loan increases the debtors' “bucket” size, then they often become ineligible for Chapter 13. As a practical matter, middle class consumer debtors are excluded from the more complicated and expensive Chapter 11 and must therefore surrender their homes.

Persuasive statutory and public policy arguments favor not counting undersecured junior home loans subject to 11 U.S.C. Section 506, in the 109(e) unsecured debt limit. Santos v. Dockery (In re Santos), Case Number 12-55145, is now pending before the 9th Circuit Court of Appeals seeking a ruling on this important consumer debtor issue.

On January 20, 2012 Santos appealed a District Court order affirming the Bankruptcy Court's order dismissing their case upon a finding that they were inelgible to be Chapter 13 debtors due to their unsecured debts being above the 109(e) unsecured debt limit. The Debtors had secured claims against their primary residence that were subject to 522(f) and 506 which were determined to put them over the limit. The Bankruptcy Court followed Smith v. Rojas, 435 B.R. 637, 649-650 (9th Cir. BAP 2010). The District Court read 109(e) as “noncontingent, liquidated and unsecured debts” rather than “noncontingent, liquidated, unsecured debts”, a subtle and significant difference from the plain language.

Read more…

Automatic Stay in Second Cases

By | January 25, 2012 | Chapter 13, Judges Corner | No comments

Reswick or Rinard? It looks like we have some direction on this issue from the Los Angeles Chapter 13 Judges:   Judge Zurzolo – Rinard: there is a stay for the bankruptcy estate in the 2nd filing;

Judge Klein – Reswick: there is no stay for the bankruptcy estate in the 2nd filing if no order extending the stay is entered;

Judge Bason – leaning heavily toward Reswick and he will probably decide the issue for himself at the special hearing on 1/31/12;

Judge Brand – unknown. Does anyone have any information on Judge Brand’s position?

Aki Koyama

Household Size per Kathy Dockery

By | January 25, 2012 | Chapter 13 | No comments

Household Size:   Our office has always followed the Economic Unit approach which is set forth in detail in the case of In re: Robinson 449 B.R. 473 (Bank. E.D. Va. 2011). This approach rejects the “heads on beds” and “dependency” approaches and is the most realistic perspective available. I have always believed that chapter 13 bankruptcy must be firmly rooted in reality to work successfully.

Aki Koyama

From Aki Koyama re: Chapter 13 Commitment Period

By | January 10, 2012 | Appeals, Chapter 13, Supreme Court | No comments

From Aki Koyama from Ms. Dockery’s office –

It appears that SCOTUS has denied cert for In re Baud which would have presented the fundamental issue of whether or not the Applicable Commitment Period is purely an independent, temporal measurement squarely before the Justices.  This breathes new life into the appeals set to be heard before the 9th Circuit to reexamine this issue in light of their prior holding in Kagenveama.

Currently, three appeals regarding the Applicable Commitment Period are pending before the 9th Circuit and one new appeal, Reed out of Oregon, is before the 9th Circuit BAP.  Hopefully, we will have an answer to this issue in 2012.  The three cases are In  re Henderson (the Idaho case and the appeal filed by the chapter 13 Trustee); In re Henderson (the same Idaho case but the appeal was filed by a creditor); In re Flores (this is the appeal with Borowitz & Clark and Rod Danielson).

NACTT Complimentary Membership to Students

By | January 5, 2012 | Chapter 13 | No comments

Dear Professor,
 
The NACTT Academy is a non-profit educational organization with e-mail and a website, ConsiderChapter13.org, being the primary method for sharing of information.  The Academy is pleased to offer you and/or your students a complimentary membership.  To take advantage simply e-mail your name and e-mail address  to Regina.Logsdon@ConsiderChapter13.org.  Please share this information with your students.
 
Additionally, as a partner with the National Association of Chapter 13 Trustees, the NACTT Academy requests that you share the attached announcement with your bankruptcy students regarding an NACTT sponsored writing contest.  The award for the first place essay, article or comment on an issue concerning Chapter 13 is a $1,000 cash prize, publication of the article in the NACTT quarterly and free registration and lodging for the NACTT seminar in New Orleans, LA,  July 12-14, 2012.
 
Thank you in advance for your assistance in sharing this information with your bankruptcy students.
 
Prof. Michaela M. White
Editor & Advisor NACTT Academy

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